Western Midstream Partners, LP (WES) Q2 2021 Earnings Call Transcript

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Western Midstream Partners, LP (WES -0.17%)
Q2 2021 Earnings Call
Aug 10, 2021, 2:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Western Midstream Partners Second Quarter 2021 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions]

I would now like to turn the conference over to Kristen Shults, Senior Vice President, Finance and Communications. Please go ahead ma'am.

Kristen Shults -- Senior Vice President, Finance and Communications

Thank you. I'm glad you could join us today for Western Midstream's second quarter 2021 conference call. I'd like to remind you that today's call, the accompanying slide deck and last night's earnings release contain important disclosures regarding forward-looking statements and non-GAAP reconciliations. Please reference Western Midstream's most recent Form 10-K and Form 10-Q, and other public filings for a description of risk factors that could cause actual results to differ materially from what we discuss today. Relevant reference materials are posted on our website.

With me today are Michael Ure, our Chief Executive Officer; and Craig Collins, our Chief Operating Officer.

I'll now turn the call over to Michael.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Thank you, Kristen, and good afternoon, everyone. Yesterday, we reported second quarter 2021 net income of $226 million and adjusted EBITDA of $491 million, an 11% increase over prior quarter's adjusted EBITDA. With strong producer activity levels and winter storm Uri behind us, both the DJ and Delaware Basins outperformed our second quarter expectations, and generated increased throughput across all products in the portfolio.

We continue to generate significant free cash flow by remaining disciplined in our cost and capital spending. For the second quarter, we generate $380 million of free cash flow and $247 million of free cash flow after distributions. We also increased our second quarter distribution to $0.319 per unit, representing a 1.3% increase over the previous quarter, which is in line with our commitment to an annualized distribution growth of 5%.

In a few moments, Craig will provide additional color on producer activity levels. We did, however, want to quickly comment on the second quarter impacts that drove higher-than-anticipated O&M expense, and our thoughts on G&A going forward. Related to O&M, we incurred $6 million in additional utility charges that were invoiced by our providers related to winter storm, Uri. The majority of these utility expenses are contractually passed through in gross margin and, therefore, had a minimal impact on adjusted EBITDA for the quarter. We also recognized $4 million for a one-time environmental liability recorded in June. This relates to an incident that occurred several years ago, and the asset has since been decommissioned. As these charges subside, we expect O&M expense to normalize during the third quarter. Despite these one-time events, our O&M as a percentage of adjusted gross margin decreased compared to the prior quarter.

We also saw year-over-year increase in G&A for the three months ended, June 30, 2021 from costs associated with contract and consulting, primarily related to IT services and fees, associated with the transition and transformation of our IT infrastructure. This increase was embedded in our 2021 guidance, and we expect G&A to remain at this level as we fully absorb the cost of being a stand-alone enterprise.

Turning to the second half of the year, we're seeing increased producer activity, specifically, in the Delaware Basin. And we've been successful in attracting incremental third-party business. To prepare for increased throughput, we now expect to be at or above the high end of our 2021 capex range of $275 million to $375 million. We've reduced our cost structure and enhanced our operational efficiencies. And we expect increased capital spend to be dedicated to gathering these incremental volumes.

While we expect these capital efficient dollars to generate a modest increase in 2021 adjusted EBITDA, this uptick in activity gives us optimism on 2022 throughput levels, and thus 2022 EBITDA. Coupled with our second quarter outperformance, we now expect to be near the high end of our 2021 adjusted EBITDA range of $1.825 billion to $1.925 billion, despite the $30 million adjusted EBITDA impact of winter storm, Uri during the first quarter. We are still fully committed to maintaining our leverage target at or below 4.0 times at the end of this year, and at or below 3.5 times at year-end 2022. By retiring near-term maturities and generating incremental EBITDA, we can more quickly reach these targets, allowing us greater optionality and flexibility to adapt to evolving market conditions.

Our performance through the first half of the year has enabled us to enhance stakeholder value. To recap, as of today, we have already retired the entire $431 million senior notes due in 2021. Through the unit buyback program and Anadarko note exchange, we have repurchased 31.34 million units, which represents over 7% of our outstanding units. We intend to opportunistically employ our previously authorized $250 million unit repurchase program, of which we have approximately $200 million remaining. Along with our planned increase to our quarterly distribution, we look forward to using these multiple paths to return value to stakeholders, as conditions dictate.

With that, I'll turn the call over to Craig to discuss our operations in the second quarter. Craig?

Craig W. Collins -- Senior Vice President and Chief Operating Officer

Thank you, Michael. Before we get into this quarter's operational performance, I would like to take a moment to discuss the Crestone deal announced in our earnings release. During the second quarter, we executed a long-term gas gathering and processing agreement with Crestone Peak Resources. As part of the deal, Crestone dedicated approximately 74,000 acres in the Watkins area, located in Adams, Arapahoe and Elbert counties in Colorado to WES, as well as up to a 148,000 additional acres that may be acquired and connected to its gas gathering system in the future. I want to thank our operations, engineering and commercial teams for their continued dedication and success in growing our third-party business. The deal demonstrates our ability to remain competitive by leveraging our expansive backbone infrastructure, and focusing on cost and operational efficiencies. The competitive advantages we provide the producers like Crestone is only made possible by our dedication to safe, sustainable and efficient operations. We are excited about our partnership with Crestone and look forward to supporting their development plans in the DJ Basin for years to come.

Turning back to the second quarter, our throughput increased across all products, as we experienced a full quarter with strong producer activity and without the market disruptions from winter storm, Uri, in the first quarter. As a result, our gas, oil and water throughput in the Delaware Basin increased by about 10%, 14%, and 16% respectively from the prior quarter. In the DJ Basin, our gas and oil throughput outperformed our expectations in the quarter, increasing about 5% and 20% respectively, from the prior quarter. The increase in rig activity early in the year, coupled with the continued completion of DUC inventory, resulted in producer outperformance during the second quarter and led to record gas throughput of 1.43 billion cubic feet per day in May. We expect DJ throughput levels to decrease in the third quarter as fewer wells are expected to come online in the back half of the year. However, we expect the recently announced Crestone deal to help offset these declines beginning in 2022.

Across the portfolio, gas throughput increased by about 5% or 220 million cubic feet per day on a sequential quarter basis. Our water throughput increased by about 93,000 barrels per day, representing a 16% sequential quarter increase. Throughput from our crude oil and natural gas liquids assets were up about 14% or approximately 83,000 barrels per day from the previous quarter. Our per-Mcf adjusted natural gas gross margin increased by $0.02 on a sequential quarter basis to $1.21 due to increased throughput and a higher average gathering fee in the DJ Basin. Our per-barrel adjusted gross margin for crude oil and NGL assets decreased by $0.05 on a sequential quarter basis to $2.40, as a result of lower gross margin contributions from equity investments.

Looking ahead, as Michael said earlier, the spike in commodity prices has helped to increase our producers activity and we're seeing this more so in the Delaware. Most of this movement is from our private producers. In fact, based on our current Delaware Basin forecast, we expect private producers to account for approximately 58% of our non-affiliate gas throughput in 2022, as compared to 50% of our non-affiliate gas throughput in 2021. Our public producers continue to spend capital relatively in line with our original 2021 budgets. Permian and, specifically, the Delaware Basin, where we operate, continues to see the highest activity levels among the US basins. And as a result of our top-tier position in the basin, we expect these companies, private and public, to continue to devote large portions of their capital programs to our acreage. These are strong tailwinds for our business and they are the reasons that we're optimistic regarding the rest of 2021 and looking forward the 2022.

At the beginning of the year, we expected to exit 2021 with a relatively flat gas throughput, a percentage increase in oil by high-single digits and water rates by low-double digits versus 2020 exit rates. Today, we expect similar oil exit rate of high-single digits, but now have higher expectations for gas to increase by the mid-single digits, and water to increase by the high-teens.

I'll now turn it back over to Michael for closing remarks.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Thanks, Craig. As we've stated in our prior calls, our staff continues its hard work toward our goals and safety, asset integrity, and being strong stewards of our environment through minimizing our environmental footprint. We look forward to issuing our second ESG report ahead of our third quarter call, where we'll highlight the tremendous progress we've made in the first 18 months as a stand-alone company, and discuss our embedded ESG goals for the future.

I want to close by expressing my thanks to our employees and contractors. They spend our first six quarters as a stand-alone company, establishing the foundation for WES, enhancing safety and protecting the environment, creating sustainable cost efficiencies, and ensuring the reliability and performance of our system. We, again, see the fruits of our labor with the Crestone deal on our ability to facilitate the accelerated producer activity we see today. With our talented workforce, an upward trend in the commodity environment, I'm proud of the tremendous potential we have at WES, as we enter the second half of the year.

With that, we'll open the line for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Kyle May at Capital One. Please go ahead.

Kyle May -- Capital One -- Analyst

Hey, good afternoon, everyone.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Good afternoon, Kyle.

Kyle May -- Capital One -- Analyst

I was wondering, if you could start by talking a little bit more about the Crestone dedication and see if you could give us a sense of when those volumes will be additive and maybe the potential

Size of the volume contribution?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah. Thanks, Kyle. So the way that we expect that to impact us is we'll have minimal capital in 2021 with the volumes really to hit our systems starting in 2022. So the biggest impact from a cash flow standpoint, starting in 2022 and beyond.

Kyle May -- Capital One -- Analyst

Got it. Okay. That's helpful. And previously, I believe you had suggested that capex in 2022 would be similar to the budget for 2021. Now that you're looking to be near the upper end of the guidance range this year, can you give us any preliminary thoughts about the budget for next year?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah. I wouldn't draw conclusions as it relates to 2022, as it relates the expected increase in capital for 2021. What we saw in 2021 was an increase in activity levels for the back half of this year and into 2022. So as we think about capital, the back half of this year wouldn't deem it as indicative of what we might expect in 2022. A lot of that will be a little bit dependent on what the activity levels are expected to be going into 2023 and beyond. But what we saw and the reason for the increase is additional well connects, hookups and directly production-oriented capital that will accrue into the system into 2022. So we'll come back with expectations on capital for 2022. I would not read into this increase as being indicative of what we might expect into future periods.

Kyle May -- Capital One -- Analyst

Got it. Okay. That's helpful. Thanks, Michael.

Operator

And our next question today comes from Jeremy Tonet, JPMorgan. Please go ahead.

Jeremy Tonet -- JPMorgan -- Analyst

Hi, good afternoon.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Good afternoon.

Jeremy Tonet -- JPMorgan -- Analyst

Just wanted to start off, I guess, on capital allocation philosophy. I was wondering if we could peel back the onion maybe a little bit more. When it comes to the 5% distribution growth versus deleveraging, versus unit repurchases, just want to see if you might be -- if there might be anything more specific as far as how you think about where to allocate capital? Any kind of rules of thumb, or any other thoughts you could share on how you guys are thinking about capital allocation philosophy, specific -- specifically going forward at this point?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah, it's a great question. So primary focus is that we want to exit this year, again, at or below 4 times and exit 2022 at or below 3.5 times. So that's the primary focus for us. Related to that is the near-term maturity that's coming due first part of 2022 that we're going to pay off using free cash, as well as the maturity in 2023 that we're going to utilize paying off free cash flow. So as a result, those being the first major tenants for us and the use of that capital, plan to continue to opportunistically look for buyback opportunities. And as it relates to the distribution, at least for the period referenced when we increased the distribution and the annual target rate, it was really in relation to the amount of savings that we were able to achieve from the buyback of units as well as the debt reduction. As we start seeing the fruits of our labors and overall leverage reduction, then we'll revisit that mix. But primarily for now, it's focused on getting us to a leverage level that we feel is putting us in an optimal place to be able to return capital to stakeholders and give us greater certainty as to the sustainability of the business going forward.

Jeremy Tonet -- JPMorgan -- Analyst

Got it. That's helpful. Thanks for that. And then looking forward to 2022, I know you talked a bit about producer activities, but just wondering what we might be able to extrapolate at this point with commodity prices moving up a bit higher here? Although they've retreated recently, but just what you see for producer activity into '22 because it takes six months, nine months plus for capex to materialize into production. Just wondering if there's any kind of sensitivities that you could provide us for kind of how next year could shake out at this point relative to this year?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah. I would just direct a couple of comments related to that. So as we came into 2021, we were on a downward slope as it relates to volumes, so headwinds coming into the year. What we're now pointing to are tailwinds, exiting the year, pretty high growth overall across the portfolio as it relates to exit 2021 over 2020. And in addition to that, the increase in capital, if you actually look at where that is being directed, it's toward connecting volumes, direct production-oriented capital, i.e., well connects, material increase relative to what we were expecting in the first quarter. So that is to bring on volumes that we're going to reap the rewards of really into 2022. So again, you're exiting the year with tailwinds relative to 2020 exit, and the increase in capital is so that we can get volumes online to really reap the rewards of that in 2022. So all very positive as we think about the impact on volumes and what we're seeing in the business.

Jeremy Tonet -- JPMorgan -- Analyst

Got it. I'll leave it there. Thank you.

Operator

And our next question today comes from Derek Walker at Bank of America. Please go ahead.

Derek Walker -- Bank of America -- Analyst

Hey, good afternoon, guys. Maybe just two quick ones from me. Craig, I think you talked about contribution from privates, I think relative to this year, next year increasing. Can you just kind of elaborate sort of how that compares to some Occi commentary from its earnings call where, I think, it affects a similar production profile to 2021. So I guess, do you see privates continue to increase? And does that commentary that you alluded to in 2022 factor in Occi's commentary? Thanks.

Craig W. Collins -- Senior Vice President and Chief Operating Officer

Yeah. I mean, I think, what we've outlined is that the mix of our non-affiliate volume is increasing among the privates relative to our public producers through the uptick in activity that we've seen throughout 2021. As for what to expect in 2022 and beyond, particularly from the public companies that we have tied into our systems, we're really going to need to take a look and see where they come out with their budgets for 2022. We continue to have dialogue with them and stay in those conversations. We've got pretty good line of sight for a number of these private producers that have signaled an increase in activity. Thus, the acceleration of capital, as Michael alluded to, on well connects and with some compression included in that as well to get ready for that growth in 2022 volumes. But as for what that mix will be in 2022 and beyond, we'll really just need to see how the '22 budgets worked out for the rest of our producers.

Derek Walker -- Bank of America -- Analyst

Got it. Appreciate.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Sorry, just one additional comment on that is that Occi obviously has a very attractive and vast portfolio of assets and really only a fraction of that. And so when you need to take into consideration when they're making comments as it relates to the totality of their portfolio that were just a fraction of that. And so when you see the impact on us, it's more specific to where they're directing that capital as opposed to the total portfolio.

Derek Walker -- Bank of America -- Analyst

Appreciate that, Mike and Craig. Maybe just a quick follow-up here. Just on the margin commentary, you talked about oil being down just relative to higher contribution from equity investments. And then on the gas margin, I think, there was just an increase due to the DJ. Should we -- how should we think about the margin going forward or margin per barrel going forward? You have the deal in the Colorado that you just announced. Should we expect that to be similar margin on the gas side? And on the oil side, should we expect that similar to 2Q run rate? Thanks.

Craig W. Collins -- Senior Vice President and Chief Operating Officer

Yeah. So as it relates to the margin, actually, pretty limited variability. Frankly, when you look at it quarter-on-quarter, so Q1 for natural gas was $1.19, and second quarter is $1.21, crude oil and NGLs $2.45, and then $2.40 for second quarter, and $0.92 for water quarter-on-quarter for both quarters. So actually, pretty limited variability when you look at it. And you're always going to see a little bit of that variance depending on the contribution from equity method investments as well as where the volumes are coming from within our contract portfolio or there are different rates associated with it. As it relates to Crestone, again, we don't actually give specifics related to contracts. But the expectation of when those volumes are going to come online is really more 2022 and beyond. So wouldn't drive any indication as to what that might mean for gross margin in 2021.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

And I would just add that going from one year to the next, the cost of service rate resets can have an impact on what those gross margins look like. So I wouldn't necessarily extrapolate too far out into the future. But in the near term, yeah, don't expect a whole lot of variability.

Derek Walker -- Bank of America -- Analyst

Great. Thanks, Mike, thanks, Craig. I appreciate. I'll leave it there.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Thank you.

Operator

And our next question today comes from Shneur Gershuni with UBS. Please go ahead.

Shneur Gershuni -- UBS -- Analyst

Hi, good afternoon, everyone. Just a few follow-ups to some of the answers that you gave previously. Maybe to start on the capital allocation question. I fully understand that the distribution increase in '21 was sort of a function of the amount of units you would reduce through the buyback program and that the priority is the next maturity in the tower. But I was kind of wondering like what are the other options that you're thinking about? And I guess it's kind of a high-class problem, but it sort of seems like you'll end up at suboptimal leverage ratio toward the end of next year. Do you consider something similar to like one of your peers recently did with a buyback from the sponsor, as well as like a one-time special step-up in the distribution?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah, Shneur. It's a great question and highlights the opportunity that we have as we get into the more attractive leverage levels. I definitely would concur that certain leverage point, the utility of additional debt reduction actually is reduced, certainly. And thankfully, we're getting to a place where the leverage is of a very attractive level where those other opportunities are available and open to us. And so the answer is yes. We're definitely open to considering the best ways in which we'll be able to return incremental capital to stakeholders. And the good part is that there are a lot of opportunities available to us at that point, primary focus for us. And in the near term, however, is to get to that ideal leverage level wherein we can assess those options. And that's been our focus up to this point.

Shneur Gershuni -- UBS -- Analyst

Great. Appreciate the color there. And maybe as a follow-up on the capex side for '22. Can you sort of share with us what you're thinking about or what the makeup would be. I understand you can't give us a final number at this point, but are there -- do you need to build a new processing plan? Or do you have plenty of capital-light options as well as what kind of capital that really is the majority of the makeup of how you're thinking about spend for '22?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah, it's a great question. So for us, we're currently expecting the mix to be pretty similar to the way that you've seen it in 2021. As we've mentioned before, we're -- we would first look if we have needs outside of our 100% owned assets to look for offloads or other arrangements so that we can utilize the capacity that exists in the areas in which we operate. And so, our current expectation for 2022 would be a similar mix of capital to what we see today. Very quick cycle volume-oriented capex that we would expect in 2022 relative to 2021.

Shneur Gershuni -- UBS -- Analyst

So just to clarify, so given that you're expecting a similar type of mix, then the delta should just really be a more function of what your expected volumes are for '21 versus your expected volumes for '22 and sort of kind of adjust it that way. Is that kind of a good road map?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah, very activity dependent type structure, exactly. Sure.

Shneur Gershuni -- UBS -- Analyst

Perfect. All right. Thank you very much. Really appreciate the color today.

Operator

And our next question today comes from Robert Mosca with Mizuho. Please go ahead.

Robert Mosca -- Mizuho -- Analyst

Hi, everyone. Thanks for taking my questions. Just wondering if you have any early indications of how cost of service adjustments could shake out in the fourth quarter maybe relative to 2020? You've pointed toward the higher end of the capex range and been somewhat deliberate in messaging that volume growth could be more of a '22 feature. So just curious, the activity in capex associated with that growth to be captured in your rates for this year's adjustment or possibly next year?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah, a couple of things to consider. We don't have an indication. Yeah, it's too early to tell and definitely be reflective on what activity levels are expected at the time that those assessments do take place. But a couple of comments is that, as Craig mentioned, the percentage of affiliate gas, for example, is increasing. So therefore, our non-affiliate gas is increasing, therefore, more third-party oriented. And so as we think about the increase in capital, I wouldn't necessary derive the conclusion that it is all specific to cost of service-type contracts. So at this point, we don't have an assessment of what they might look like, but would not exactly draw a straight line as it relates to the increase in capital and the impact on cost of service rates that might occur at the end of the year, because a fair amount of that might be activity levels that are not related to the cost of service oriented contracts.

Robert Mosca -- Mizuho -- Analyst

Okay. Great. That's helpful color. And then in your prepared remarks, I think you said that the Crestone deal should offset some DJ declines in '22. I'm not sure if I heard that right. But just wondering if your base case expectation on the DJ for next year is declines in your legacy acreage? Essentially, if you could provide more color there, that would be helpful.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Craig, do you want to comment on that?

Craig W. Collins -- Senior Vice President and Chief Operating Officer

Yeah. Actually, our volumes up in the DJ for next year relative to this year, we see is being relatively flat from where we're going to exit this year. And that's due in large part to the incremental volumes that we'll see in the Crestone deal to help offset the, what would otherwise be natural declines.

Robert Mosca -- Mizuho -- Analyst

Okay. Got it. That's all I had for me. Thanks.

Operator

[Operator Instructions] Today's next question comes from Sunil Sibal with Seaport Securities. Please go ahead.

Sunil Sibal -- Seaport Securities -- Analyst

Yeah, hi. Good afternoon, everybody. And thanks for all the color on the call. So, since the start of the year, WES has done a fairly decent job of managing debt maturities and also kind of laying out a plan for debt reduction. I'm just curious, how your discussions with rating agencies have been on that front? And when do you think you would get some credit from them for the actions that you have taken so far?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah. It's a great question. So, as it relates to the credit agencies, we maintain a very constant dialogue with them. Obviously, the positive results that we've seen in the debt reduction overall is received very positively, especially as it relates to actual debt reduction and not just EBITDA growth being the improvement overall in those metrics. As it relates to ratings, however, they've been pretty open with us that there will be some connection of varying degrees, depending on the agency that you referred to, with Occidental in their ratings. And so, we would expect that, that would continue despite all the positive debt reduction activities that we've engaged in. So, I think that's really where it comes out. I look at us as being very much investment grade in our metrics today, view it as an indication of the positive elements of our business, the way that we have been able to reduce debt overtime and put ourselves in a very attractive position from a leverage standpoint. But from a rating perspective, it will be somewhat dependent on our largest customer, Occi.

Sunil Sibal -- Seaport Securities -- Analyst

Got it. Kind of related to that, could you give us a sense of where third-party kind of cash flows would end up in or ballpark would end up in 2021? And it seems like '22, there will be further kind of uptick in the third-party numbers or contributions?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

We don't have anything additional disclosed other than what we disclosed in the 10-K as it relates to affiliate versus non-affiliate volumes, which is in the 60-odd-percent range from an affiliate revenue perspective.

Sunil Sibal -- Seaport Securities -- Analyst

Are you saying that you still expect to be in that ballpark for the next couple of years? Or should we just kind of have to wait out to see how that -- how those numbers come out?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah. We don't actually provide any specific projection or guidance as it relates to where that ratio will go over time.

Sunil Sibal -- Seaport Securities -- Analyst

Got it. Thanks for that. And then last question for me was on the M&A front. There has been some transactions in the midstream space, I was kind of curious, how do you view your asset positioning and some things that might be available around where you guys are?

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Yeah. I think -- it's a great question. So a couple of comments as it relates to that. We have seen an uptick and an improvement in terms of the attractiveness of assets like our portfolio. And so, as we think about non-core assets, that puts us in a great position to be able to find opportunities for them as they do exist. From a sales perspective, as it relates to acquisition targets, part of the element of us getting ourselves into the best place from a leverage standpoint is that we would be able to opportunistically look out for those M&A opportunities that would be accretive overall to our operational footprint and to our financial footprint as we look forward. And so, we can definitely see with our strong asset base, strong customer relations and customer base to be able to achieve some synergies, if we see opportunities in around where our assets might sit. And from a leverage standpoint, putting ourselves in the best position to be able to execute on that has been our goal up to this point, and will continue to be until we get to that optimal range.

Sunil Sibal -- Seaport Securities -- Analyst

Okay. Thanks, Mike.

Operator

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for the final remarks.

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Thank you very much for joining us for this quarter's call. Very positive performance by the team. I'd like to thank the entire employee base for all of their efforts up to this point, and look forward to what we can deliver in the future. Thank you all for joining.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Kristen Shults -- Senior Vice President, Finance and Communications

Michael P. Ure -- President, Chief Executive Officer, and Acting Chief Financial Officer

Craig W. Collins -- Senior Vice President and Chief Operating Officer

Kyle May -- Capital One -- Analyst

Jeremy Tonet -- JPMorgan -- Analyst

Derek Walker -- Bank of America -- Analyst

Shneur Gershuni -- UBS -- Analyst

Robert Mosca -- Mizuho -- Analyst

Sunil Sibal -- Seaport Securities -- Analyst

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